Ricardo Pillai
3 min read
In This Article:
We came across a bullish thesis on CoStar Group, Inc. (CSGP) on DIY Investor’s Substack. In this article, we will summarize the bulls’ thesis on CSGP. CoStar Group, Inc. (CSGP)'s share was trading at $81.07 as of 10th June. CSGP’s trailing and forward P/E were 281.86 and 102.04 respectively according to Yahoo Finance.
A business man holding a tablet, discussing the features of a Real Estate mobile-focused tech platform.
CoStar Group (CSGP) is a dominant force in commercial real estate data and digital marketplaces, offering subscription-based platforms like CoStar Suite, LoopNet, and Apartments.com that serve over five million properties across multiple countries. With more than 80% of revenue coming from subscriptions and recent expansion into Europe and Canada, the company combines a sticky, recurring revenue model with global growth potential.
Despite trading at a lofty 68x earnings, this valuation aligns with its 22% CAGR over the past 15 years and a long-term average PE of 68, suggesting the market has consistently recognized its durable competitive advantages. While a compressed multiple of 30x would imply significant overvaluation, sustained growth near 45% over the next five years could still drive 17–22% annual returns, depending on the exit multiple. The company’s forecasts are seen as reliable due to its highly predictable earnings and consistent EPS beats, often by 20%.
Morningstar concurs with its quality, assigning a fair value of $82 and highlighting its wide moat, rooted in proprietary data, deep workflow integration with 94–98% renewal rates, and strong network effects.
CoStar’s capital allocation is exemplary: it maintains over $3.7 billion in cash with minimal debt, invests aggressively in R&D and platform expansion, and has a track record of transformative M&A. The company reinvests all earnings, opting for long-term compounding over short-term payouts. While antitrust risks loom, they appear manageable. Ultimately, CoStar’s premium valuation reflects enduring fundamentals, exceptional execution, and moaty economics that the market has appreciated for over two decades.
Previously, we highlighted a bullish thesis on CoStar Group (CSGP) by Douglas Ott, who focused on its aggressive Homes.com expansion, M&A potential, and founder-led long-term vision.The stock has since the coverage experienced a 4% appreciation in price. DIY Investor echoes the bullish sentiment but leans on CoStar’s high-margin subscription model, wide moat, and durable growth economics to justify its premium valuation and sustained compounding potential.
